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PARTNERSHIP

Toyin Omoniyi
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Posted on November 20, 2015;

Partnership businesses are very common and can be started by friends who share similar interests. A partnership can start with as little as 2 people as long as they all agree to do business together with the intention of making profit. A partnership must not exceed 20 people except for firms of lawyers and accountants.

It is very easy to form a partnership; it can even be formed orally but as always, it is advisable that it is put into writing. This is called a Partnership Agreement. A partnership agreement is very important because it serves as a form of reference in time of crisis.

A partnership agreement contains the rights and obligations of each partner and can be changed at any time once the partners agree to it. The agreement should be clear, explicit and unambiguous so that it can be easily understood and enforced by law, where necessary. Once it is signed, it can be enforced by law.

All partners are expected to bring together their money, skills and other resources for the success of the partnership. The partners will also share profits and losses equally according to the terms and conditions of their agreement.

Every partner in a partnership has equal responsibility and authority to run the business. They should all be involved in the day-to-day operations of the business and make management decisions together because the actions of one partner is binding on the entire partnership. This means that if one partner signs a contract on behalf of the partnership, all the partners will be responsible for that contract.

A partnership enjoys several advantages such as:

·         There is no minimum amount to start a partnership.

·         The partners make decisions themselves without any interference from outsiders.

·         There is division of labour among the partners because they all share ideas, responsibilities and duties.

·         There is collective experience, skill and knowledge from all partners which leads to better products and services.

·         The partnership has a larger borrowing capacity which adds financial strength to the partnership.

·         Each partner provides moral support for the other(s) and allows for creative brainstorming.

·         It brings people with diverse skills and expertise together.

A partnership does not have corporate personality so the partners are directly liable for any actions of the partnership. The partners do not have separate legal entity, they are all jointly and severally liable for the full value of any partnership debt.

It is quite cheap to raise the funds needed to start a partnership which will help the partners save money that can further be invested into the business. Since losses are shared by all the partners, it is sure that they will all put in their best and contribute wisely to the partnership. This acts as a check on the partners so that they can manage the business properly.

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